US-China $30bn tariff deal, pharma duties and the 301 probe: what it means for Sri Lanka

The biggest US trade news of the past two weeks came out of Washington, not from a new tariff on South Asia. After a three-day summit between President Trump and President Xi Jinping, Fox News reported on 26 September 2026 that the two countries had agreed to lower tariffs on about US$30 billion of goods each way. The White House described them as "non-sensitive goods". The deal was reached through the new US-China Board of Trade.

On 27 September the White House published the "30-for-30" lists, and on 28 September the Associated Press (via PBS) reported what is on them:

• Chinese goods entering the US: 77 categories, including fireworks, tableware, toys, Christmas ornaments and soccer balls.
• US goods entering China: 1,619 categories, including farm products, personal care items, timber, medical equipment and coal. Soybeans are not on the list.
• Excluded: chips, electric vehicles and batteries.

China's commerce ministry said rates on more than 90% of the covered products will move to most-favoured-nation levels, AP reported. The White House release says the lists are "with a view toward" reduced tariffs, consistent with each country's domestic laws, and it gives no start date. Capital Economics told AP the average US tariff on Chinese goods would fall only from about 22% to about 20.5%. AP also reported that the two sides agreed to extend their wider trade truce, which was due to end on 10 November, into January.

Two other US actions matter for the region:

1. Pharmaceuticals (Section 232). A 100% tariff on certain patented medicines and their ingredients took effect on 29 September, CNN reported (published by ABC Columbia). Large drugmakers are largely exempt through separate pricing deals, so the cost falls mostly on small and midsize firms.
2. The excess capacity probe (Section 301). The ICPA Section 301 tracker, updated 4 October, says USTR has still not published a finding in its investigation of 16 economies, including India, Bangladesh, Vietnam, Indonesia, Cambodia and Thailand. The tracker notes press reports from 17 September that USTR was holding the report until after the Trump-Xi meeting. The same tracker says the forced-labour Section 301 duties of 10% or 12.5% on 60 economies have been collected since 24 July, that there is no exclusion process, and that 25 states are challenging them.

Sri Lanka is not part of the China deal and was not named in the excess capacity probe. Its goods face the 10% forced-labour Section 301 rate on top of normal US duties, as covered in our earlier post. The Daily FT reported in August that most regional competitors are also at 10%, so the edge is small.

Talks on a bilateral agreement continue. The Morning reported on 17 September that former ambassador Mahinda Samarasinghe told a Sri Lanka Institute of Directors meeting that "we have finished 90% of the content of the agreement". He said Sri Lanka would like a clause like Bangladesh's, where certain textiles made with US cotton and fibres qualify for a 0% rate, because "Bangladesh is one of our strongest competitors". No final text has been published.

• Competition in the US market. The China list is narrow and mostly consumer goods such as toys and decorations, not apparel, rubber or tea. But it shows the US is now cutting tariffs product by product through deals. Countries that sign deals with cotton or input clauses can undercut Sri Lankan apparel on price.
• The excess capacity finding is the next big risk for Asian competitors. If USTR proposes new tariffs on India, Bangladesh, Vietnam or Cambodia, Sri Lanka's relative position could improve. If it settles with them, it could weaken. Neither has happened yet.
• Freight. Drewry's 1 October World Container Index note said the extended US-China truce could support a rebound in US-bound demand after Golden Week. More China-US cargo can tighten space and lift rates on transpacific services that Sri Lankan cargo also uses.
• Pharmaceutical importers in the US may face higher costs for some patented products, which matters for any Sri Lankan firm supplying ingredients or packaging into that chain.

• Check your HS codes against the full US tariff schedule and confirm the 10% Section 301 rate applies to your lines. Our HS code tool can help you start.
• Ask US buyers whether they plan to shift orders after the China list or any future competitor deals.
• Watch for USTR's excess capacity finding and for news on the Sri Lanka-US agreement, especially any cotton or input clause.
• Keep supply chain records ready for forced-labour checks, as covered in our post on the forced labour import ban.
• For transpacific bookings after Golden Week, confirm space and rates early.